MAKING CENTS: A higher standard of care

Tuesday

Jul 25, 2017 at 9:30 AM

By John Napolitano, CFP CPA

The financial services business has come under a lot of pressure in recent years. Pressure has arisen over pricing, the fiduciary rule and at least within the profession, over the appropriate standard of care.

The first issue is pricing. With the advent of computerized guided models for investment management, it is possible to acquire asset management services for as little as 1/4 to 1/2 of 1 percent. That’s a lot less than many firms currently charge, and you would be well within reason to ask why anyone would be willing to pay more.

One such answer may be for superior performance. But if you have been an investor for a long time and through many up and down market cycles, you know just how difficult (dare I say nearly impossible) it is to consistently post superior results.

The next question may be what are you getting for services? If the service is purely for asset management, then the pricing of online discount alternatives may soon become a relevant benchmark for how much investors are willing to pay for investment-only services.

Simultaneously, there has been a lot of conversation within the profession about the standard of care delivered to clients within the financial planning profession. At this point, most visionaries and successful advisory teams today have upped their game in terms of the family’s overall financial plan. These more progressive advisors are overseeing client estate planning, risk management planning and protection, business succession planning, income tax planning, retirement planning, education planning and just about anything else that falls within the category of significant financial concerns. Not just anyone can up their game. Technical knowledge and a passion to serve at a higher level are essential.

To effectively deliver these services, the profile of a firm must also continue to evolve. Many firms are still one man bands with a part time administrative assistant. To deliver the more technically competent and time-consuming standard of care demanded by clients today, these smaller firms need to evolve to a point where they’ve got the diverse subject matter expertise at their fingertips.

The most ideal situation may be to have that expertise in house. But the practical answer for firms evolving to the new higher standard of care will use outsourced professionals who can deliver the expertise needed to properly carry out the advisors promise to oversee your entire financial life.

The last major issue facing investors and the profession alike is the fiduciary rule. In short, this rule requires any professional calling themselves a financial planner to act in their client’s best interests. Sounds both appropriate and intuitive to me. But unfortunately many highly skilled sales people have been trained to sell the talk of holistic wealth management and then deliver as little service as possible so they can go practice that sales pitch on someone else.

Decide what is right for your family: discount asset management services or comprehensive wealth management - then evaluate where you are and go to a firm that can meet your needs.